Correlation Between Shandong Longquan and Cemex SAB

Can any of the company-specific risk be diversified away by investing in both Shandong Longquan and Cemex SAB at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shandong Longquan and Cemex SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Longquan Pipeline and Cemex SAB de, you can compare the effects of market volatilities on Shandong Longquan and Cemex SAB and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shandong Longquan with a short position of Cemex SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Longquan and Cemex SAB.

Diversification Opportunities for Shandong Longquan and Cemex SAB

-0.66

Correlation Coefficient

Shandong Longquan  Cemex SAB

Excellent diversification

The 3 months correlation between Shandong and Cemex is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and Cemex SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemex SAB de and Shandong Longquan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shandong Longquan Pipeline are associated (or correlated) with Cemex SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemex SAB de has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and Cemex SAB go up and down completely randomly.

Pair Corralation between Shandong Longquan and Cemex SAB

Assuming the 90 days trading horizon Shandong Longquan Pipeline is expected to generate 1.25 times more return on investment than Cemex SAB. However, Shandong Longquan is 1.25 times more volatile than Cemex SAB de. It trades about 0.17 of its potential returns per unit of risk. Cemex SAB de is currently generating about -0.04 per unit of risk. If you would invest  357.00  in Shandong Longquan Pipeline on August 31, 2024 and sell it today you would earn a total of  120.00  from holding Shandong Longquan Pipeline or generate 33.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Shandong Longquan Pipeline  vs.  Cemex SAB de

Shandong Longquan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longquan sustained solid returns over the last few months and may actually be approaching a breakup point.

Cemex SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemex SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong Longquan and Cemex SAB

The main advantage of trading using opposite Shandong Longquan and Cemex SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Longquan position performs unexpectedly, Cemex SAB can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cemex SAB will offset losses from the drop in Cemex SAB's long position.

The idea behind Shandong Longquan Pipeline and Cemex SAB de pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.